Reiterate ‘buy’ on Lupin with a new fair value of R1,720 per share backed by multiple drivers to support growth. Over the past two years the US generics portfolio has evolved from a commodity to a high-margin, resilient portfolio. We expect continued growth and margin momentum in FY16/17 (led by US launches) and see 28% ebitda guidance as reflective of Lupin’s evolving US portfolio; Lupin is now enhancing its internal efforts to ride the next wave of technologies and is prudently allocating capital for the longer term build-up of pipeline.
Improving product profile and strong on-the-ground execution have underpinned Lupin’s strong performance over the past couple of years in all the markets it is present in. We expect Lupin to continue on the same growth track, driven by the US markets, where it has one of the most visible pipelines amongst top tier Indian generics.
Lupin’s stellar outperformance in India, the US, Japan and other EMs over the year, on the back of its prudent positioning and on-the-ground execution, has enabled it to capture market share on a sustainable basis. Its efforts to build a sustainable franchise through prudent product selection and rational capital allocation in its research and developments efforts should continue to drive all round growth and profitability across markets; accordingly we estimate a top-line CAGR of 17% over FY14-17.